On December 29, 2021, the Eleventh Circuit in Hewitt v. Commissioner, No. 20-13700 (11th Cir. 2021), reversed the Tax Court's decision denying the Hewitts' US$2.7 million charitable contribution deduction for the donation of a conservation easement split over several years.

The Tax Court decision originally determined that the Hewitts were not entitled to carry over a charitable contribution deduction for the donation of a conservation easement, adopting the IRS’s novel litigating position that the applicable regulation did not permit the subtraction of the value of post-donation improvements to the property in the extinguishment proceeds allocated. The Eleventh Circuit reversed this decision finding that Treasury violated the Administrative Procedures Act's (APA) procedural requirements when promulgating the regulation due to its failure to respond to comments by the New York Landmarks Conservancy and others. The Eleventh Circuit decision will impact a large number of charitable deductions that the IRS has challenged for noncompliance with the regulation.

This marks the second significant Eleventh Circuit decision where taxpayers represented by the Dentons team have succeeded in reversing the Tax Court's decision to disallow the taxpayers' entire charitable deductions based on "technical issues."

“We are thrilled that the Eleventh Circuit reached the right decision for the Hewitts, who made a generous donation that protects critical farmland in perpetuity,” said Michelle Abroms Levin, who led the team from Dentons representing the couple. “The APA’s procedural requirements benefit both the IRS and taxpayers by giving the IRS important feedback with respect to proposed rules and by giving taxpayers guidance as to the purpose and meaning of those rules.”

The team included Levin, Ronald Levitt, Gregory Rhodes, David Wooldridge, Logan Abernathy, Sarah Green, Sidney W. Jackson, IV and Kristin Martin.

Check out this post by Levin and Abernathy on our US Tax Disputes blog for more details on the case.